Item
1.01. Entry into a Material Definitive Agreement.
As
disclosed in our Current Reports on Form 8-K filed on February 9, 2006 and
March
1, 2006, Chesapeake Funding LLC (“Chesapeake”), a newly formed wholly-owned
subsidiary of PHH Corporation (“PHH”, “Company”, “we” or “our”), obtained $3.7
billion in commitments from multi-seller commercial paper conduits and banks
which allowed for the redemption of certain outstanding notes as described
more
fully in Item 1.02 below and for the restructuring and refinancing as described
in this Item 1.01. This refinancing was effected, in part, through Chesapeake’s
execution of the following agreements: (i) the Base Indenture (the “Base
Indenture”), dated as of March 7, 2006, between Chesapeake, as issuer, and
JPMorgan Chase Bank, N.A. (“JPMorgan”), as indenture trustee, (ii) the Series
2006-1 Supplement (the “Series 2006-1 Supplement”), dated as of March 7, 2006,
among Chesapeake, as issuer, PHH Vehicle Management Services, LLC (“PHH Arval”),
a wholly-owned subsidiary of the Company, as administrator, JPMorgan, as
administrative agent, certain commercial paper conduit purchasers, banks
and
agent banks as set forth therein, and JPMorgan, as indenture trustee, to
the
Base Indenture, pursuant to which Chesapeake may issue up to $2.7 billion
aggregate principal amount of its Series 2006-1 Asset Backed Variable Funding
Investor Notes (the “Series 2006-1 Notes”) and (iii) the Series 2006-2
Supplement (the “Series 2006-2 Supplement” and together with the Series 2006-1
Supplement, the “2006 Supplements”), dated as of March 7, 2006, among
Chesapeake, as issuer, PHH Arval, as administrator, JPMorgan, as administrative
agent, certain commercial paper conduits purchasers, banks and agent banks
as
set forth therein, and JPMorgan, as indenture trustee, to the Base Indenture,
pursuant to which Chesapeake may issue up to $1 billion aggregate principal
amount of its Series 2006-2 Asset Backed Variable Funding Investor Notes
(the
“Series 2006-2 Notes”).
The
Base
Indenture provides for the issuance from time to time of one or more series
of
asset backed investor notes that are collateralized by leased vehicles, the
related lease agreements and certain other related assets, in each case
originated by PHH Arval in its fleet operations. The 2006 Supplements provide
for the issuance of the Series 2006-1 Notes and the Series 2006-2 Notes,
respectively. Both the Series 2006-1 Notes and the Series 2006-2 Notes are
scheduled to mature on March 6, 2007, subject to extension pursuant to the
terms
of the respective Supplement. The Series 2006-1 Notes and Series 2006-2 Notes
bear interest at variable rates payable monthly.
On
March
7, 2006, Chesapeake made an aggregate drawing of $3.35 billion under the
Series
2006-1 Notes and the Series 2006-2 Notes, which was used to redeem the Old
Notes
and Investor Notes as described more fully in Item 1.02 below. The remaining
undrawn capacity under the Series 2006-1 Notes of $350 million is available
to
provide incremental funding for our domestic vehicle financing
needs.
The
Base
Indenture contains customary covenants that limit Chesapeake’s ability, among
other things, to incur additional indebtedness, pay dividends on or redeem
or
repurchase its own equity interests, make certain investments, expand into
unrelated businesses and create liens. An event of default may occur under
the
Base Indenture if Chesapeake fails to pay interest and principal when due,
fails
to observe or perform any covenant or agreement in the Base Indenture, becomes
taxable as a corporation for federal income tax purposes, qualifies as an
“investment company” within the meaning of the Investment Company Act of 1940 or
becomes insolvent. An event of default may result in the acceleration of
the
maturity requiring the immediate payment of the unpaid principal amount together
with accrued and unpaid interest. Chesapeake has the option to repurchase
the
Series 2006-1 Notes and the Series 2006-2 Notes upon notice at a price equal
to
the aggregate outstanding principal balance plus accrued and unpaid interest
on
such balance. The foregoing description of the Base Indenture and the 2006
Supplements does not purport to be complete and is qualified in its entirety
by
reference to the full text of each agreement, which are filed as Exhibits
10.1,
10.2 and 10.3 to this Current Report on Form 8-K and are incorporated herein
by
reference.
The
restructuring of Chesapeake’s financing arrangements also allowed for the
implementation of a like-kind exchange program (“LKE Program”) in accordance
with Section 1.1031(k)-1(g) of the Treasury Department regulations under
Title
26 of the Code of Federal Regulations. In order to meet the requirements
of the
LKE Program, we have engaged a third-party qualified intermediary, PHH Funding,
LLC (“PHH Funding”), to administer, among other things, certain aspects of the
distribution of proceeds from the sale of vehicles to the acquisition of
new
vehicles. The mechanics of the application of such proceeds and other duties
of
PHH Funding are set forth in the Master Exchange Agreement, dated as of March
7,
2006, between PHH Funding, Chesapeake Finance Holdings LLC, a wholly-owned
subsidiary of the Company, and D.L. Peterson Trust. The foregoing description
of
the Master Exchange Agreement does not purport to be complete and is qualified
in its entirety by reference to the full text of the agreement, which is
filed
as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated herein
by
reference.
Item
1.02. Termination of a Material Definitive Agreement.
On
March
7, 2006, the wholly-owned subsidiary of the Company formerly known as Chesapeake
Funding LLC changed its name to Chesapeake Finance Holdings LLC (the “Prior
Issuer”) and redeemed all of its floating rate callable asset backed notes (the
“Term
Notes”) with
an
aggregate outstanding principal balance of $1.1 billion. The Prior Issuer
also
provided notice and redeemed all of its outstanding variable funding asset
backed notes (“VFNs” and together with the Term Notes, the “Old Notes”) with an
aggregate outstanding principal balance of $1.7 billion. In addition, the
Prior
Issuer redeemed its senior preferred membership interests (the “PMIs”), which
totaled $398 million and were held by Terrapin Funding LLC (“Terrapin”), a
wholly-owned subsidiary of the Company. The proceeds from the redemption
of
these PMIs were used by Terrapin to redeem all of its floating rate asset
backed
investor notes (the “Investor Notes”) with an aggregate outstanding principal
balance of $367 million.
Following
the redemption of the Old Notes and Investor Notes, the Prior Issuer terminated
the following agreements, effective March 7, 2006: Base Indenture (the “Old Base
Indenture”), dated as of June 30, 1999, as amended, between the Prior
Issuer and The Chase Manhattan Bank (“Chase”), now known as JPMorgan, as
indenture trustee; Series 1999-3 Indenture Supplement, dated as of October
28,
1999, among the Prior Issuer, PHH Arval, as administrator, JPMorgan, as
administrative agent, certain commercial paper conduit purchasers, certain
banks
and certain funding agents and Chase, now known as JPMorgan, as indenture
trustee, to the Old Base Indenture; Series 2001-1 Indenture Supplement,
dated as of October 21, 2001, between the Prior Issuer and Chase, now known
as
JPMorgan, as indenture trustee, to the Old Base Indenture; Series 2002-1
Indenture Supplement, dated as of June 10, 2002, between the Prior Issuer
and
JPMorgan, as indenture trustee, to the Old Base Indenture; Series 2003-1
Indenture Supplement, dated as of August 14, 2003, between the Prior
Issuer and JPMorgan, as indenture trustee, to the Old Base Indenture;
Series 2003-2 Indenture Supplement, dated as of
November 19, 2003, between the Prior Issuer and JPMorgan, as indenture
trustee, to the Old Base Indenture; Series 2004-1 Indenture Supplement, dated
as
of July 29, 2004, between the Prior Issuer and JPMorgan, as indenture trustee,
to the Base Indenture; and Series 2005-1 Indenture Supplement, dated as of
July
15, 2005, between the Prior Issuer, PHH Arval, as administrator, JPMorgan,
as
administrative agent, certain commercial paper conduit purchasers, certain
banks
and certain funding agents and JPMorgan, as indenture trustee, to the Old
Base
Indenture.
Item
2.01 Completion of Acquisition or Disposition of Assets.
The
information disclosed under Item 1.01 of this Current Report on Form 8-K
relating to the Base Indenture, Series 2006-1 Supplement, Series 2006-2
Supplement, Series 2006-1 Notes and Series 2006-2 Notes is incorporated herein
by reference.
Item
2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The
information disclosed under Item 1.01 of this Current Report on Form 8-K
relating to the Base Indenture, Series 2006-1 Supplement, Series 2006-2
Supplement, Series 2006-1 Notes and Series 2006-2 Notes is incorporated herein
by reference.
Item
9.01. Financial Statements and Exhibits.
(c) Exhibits
|
Exhibit
10.1
|
Base
Indenture, dated as of March 7, 2006, between Chesapeake Funding
LLC,
as issuer, and JPMorgan Chase Bank, N.A., as indenture
trustee.
|
|
Exhibit
10.2
|
Series
2006-1 Supplement, dated as of March 7, 2006, among Chesapeake
Funding LLC,
as issuer, PHH
Vehicle Management Services, LLC, as administrator, JPMorgan
Chase Bank,
N.A., as administrative agent, certain commercial paper conduit
purchasers, certain banks, certain funding agents, and JPMorgan,
as
indenture trustee.
|
|
Exhibit
10.3
|
Series
2006-2 Supplement, dated as of March 7, 2006, among Chesapeake
Funding
LLC, as issuer, PHH Vehicle Management Services, LLC, as administrator,
JPMorgan Chase Bank, N.A., as administrative agent, certain commercial
paper conduit purchasers, certain banks, certain funding agents,
and
JPMorgan, as indenture trustee.
|
|
Exhibit
10.4
|
Master
Exchange Agreement, dated as of March 7, 2006, among PHH Funding,
LLC,
Chesapeake Finance Holdings LLC and D.L. Peterson
Trust.
|
Forward-Looking
Statements
This
Current Report on Form 8-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended. These statements
are
subject to known and unknown risks, uncertainties and other factors which
may
cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied
by
such forward-looking statements. Statements preceded by, followed by or that
otherwise include the words "believes", "expects", "anticipates", "intends",
"projects", "estimates", "plans", "may increase", "may fluctuate" and similar
expressions or future or conditional verbs such as "will", "should", "would",
"may" and "could" are generally forward-looking in nature and not historical
facts.
You
should consider the areas of risk described under the heading “Forward Looking
Statements” in our periodic reports under the Securities Exchange Act of 1934,
as amended, and those risk factors included as Exhibit 99 thereto, titled
“Risk
Factors Affecting our Business and Future Results,” in connection with any
forward-looking statements that may be made by us and our businesses generally.
Except for our ongoing obligations to disclose material information under
the
federal securities laws, we undertake no obligation to release publicly any
updates or revisions to any forward-looking statements, to report events
or to
report the occurrence of unanticipated events unless required by law.